Good morning. Another busy Q1 schedule:

• Rush Street Interactive sees profitability on the horizon.

• Playtech says it still hopes to accelerate CaliPlay US entry.

• Kindred is the subject of an activist investor’s attentions.

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Rush Street Interactive Q1

• Revenue up 21% to $134.9m, adj. EBITDA losses nearly tripled to $43.4m.

• Excluding New York, the adj. EBITDA loss would have been $15m.

• Increased guidance for FY22 to between $600m-$650m from $580m-$630m.

Profitability beckons: CEO Richard Schwartz preceded his remarks on the earnings call by saying RSI was “on the path towards building a sustainable and long-term profitable business”. The company hopes to achieve EBITDA profitability in H223.

• The company noted it turned an EBITDA profit in Michigan in Q1.

• Wells Fargo noted EBITDA would improve sequentially with Q4 being the best quarter - they estimate losses of ~$15m for the quarter.

Not so bleak house: Jefferies noted the ”pendulum has swung too far” on the pessimism about sector profitability. “The quarter defines reasons for RSI to succeed as a smaller and disciplined player,” they added.

• The team at Macquarie said given RSI’s ability to minimize churn, they have “more confidence in RSI reaching double digit margins quicker than peers”.

Sitting it out: Schwartz noted RSI was more confident of achieving profitability in states with both icasino and OSB. Wells Fargo noted RSI might opt out of future OSB-only state launches. 

• “We are hard-pressed to believe that going forward, it will allocate significant marketing/acquisition spend to future, OSB-only jurisdictions (or those with low likelihood of legalized iGaming),” the analysts wrote.

Growing the base: RSI said real-money monthly active users rose 32% to over 150,000 with an ARPMAU of $265. On the earnings call, CEO Richard Schwartz said RSI had a “solid history of attracting high-quality players that produce meaningful revenues over time”. 

• Schwartz said that excluding its “most recent market launches for the last couple of quarters”, RSI will have reached “profitability as measured by adj. EBITDA by the end of 2022”. 

• The group said overall market share remained stable at ~10% for icasino and just under 5% for OSB. 

Calling a trend: On marketing, Schwartz said RSI was seeing “a more rational approach” on the part of its competitors since the Super Bowl, confirming recent comments from Caesars and Flutter.

• “This has been a consistent theme that we continue to see, and we're excited about that.”

• “It gives us an opportunity to continue the great results where we've been able to essentially double the new players for the same price that we were paying before.”

Branching out: Having launched in Ontario, Schwartz noted RSI will be launching in Mexico thanks to the partnership it signed in January with Grupo Multimedios. Schwartz said there were no specific timeframes for RSI’s Mexico launch.

Download downer: Schwarz made some interesting comments on the app download data emerging from Ontario, suggesting the company doesn’t regard them as too important.

• “Not all strategies are driven by getting downloads directly from the store,” he said. “We know that you can have a large volume of downloads, but not have a large number of depositors. 

• “We're going to have to wait and see the market size from when the regulators announce their numbers publicly.”

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Playtech trading update

Ton-up: In a brief statement, Playtech said adj. EBITDA for the first three months of the year came in at “more than €100m”. It added that the positive run rate continued through April. The company said it saw a “strong performance” in both B2B and B2C. 

• Snaitech in Italy continued to benefit from the retail betting recovery and favorable sports results.

• B2B was driven by “very strong momentum” in the Americas, in particular CaliPlay.

Transaction inaction: Speaking of CaliPlay, Playtech said that although capital market conditions are “currently challenging”, the company continued to “explore a possible transaction” (i.e. the merger with Tekkorp) that would “allow Caliplay to enter the U.S. market on an accelerated basis”.

• The company also noted “some positive progress” on the discussion with the TTB investor group, which includes CEO Mor Weizer, but that there remains no certainty that a deal will be forthcoming.

• Recall, Scott Longley wrote previously that Playtech is likely to remain a public entity should the TTB bid succeed. 

Raise: Peel Hunt noted the “earlier-than-usual” trading update and said it was upgrading its 2022 EBITDA forecast to €375m compared to the company’s implied €400m+.

Kindred’s activist investor

To the barricades: Corvex, a New York-based activist investor which recently amassed a 10%+ stake in Kindred, went public via comments to Reuters about its wish for the Stockholm-listed Kindred to pursue strategic alternatives including a potential sale of the business.

• "We believe Kindred has built a strategic position in the rapidly growing global online gaming space," Corvex said.

• "A fully informed Board will be in the best position to weigh any strategic alternatives, compared with Kindred's stand-alone business plan.”

Getting defensive: Kindred issued a statement from chairman Evert Carlsson noting the comments.

Carlsson: “We are confident about the long-term opportunities for the company and value creation potential for all our shareholders. We welcome and look forward to continuing a constructive dialogue with all our shareholders going forward.”

Call me Meister: HT iGaming NEXT which noted that Keith Meister (pictured above), founder of Corvex, is also a board member at MGM Resorts International.

VICI Properties Q1

In brief: Revenues were up 11.3% to $416.6m. The company is on track to complete the $17.2bn MGM Growth Properties (MGP) buyout this quarter and completed the Venetian transaction this week. VICI also recently underwent a $5bn loan notes offer. 

• CEO Ed Pitoniak said the Venetian was “one of the most magnificent and majestic” class A assets in US real estate. 

• COO John Payne said “we see a long runway for growth within gaming”. 

Ed Pitoniak: “By looking past the short-term disruption in Las Vegas created by Covid, VICI was able to get one of the most iconic real estate assets in the country for a cap rate that today couldn't even buy you a well-located Dollar General.”

Get real: Noting Realty Income’s entry into the gaming space with the Boston Encore deal announced by Wynn in February, Pitonisk said it was an “unallowed positive” to have a storied REIT operating in the space. Realty Income was founded in 1969.

• Pitoniak noted that Realty said on its own earnings call a day previous that Wynn did not run a competitive bid process for the Boston Encore.

• Pitoniak: “Institutionalization does not happen if institutions don't come into the category.”

Flutter analyst update

Major disconnect: Analysts at Wells Fargo said they see a “major valuation dislocation/conglomerate discount” with Flutter. 

• Either Flutter ex-US is trading at around 5.8x EV/EBITDA or Flutter US is trading at 1.6x estimated 2023 EV/Sales. This represents a 30% discount to DraftKings “despite being bigger and expecting to be EBITDA positive” for FY23.

Pathfinder: “We recognize that aside from a public listing, there’s not a clear path to fully unlock this value, and the FOX arbitration is still an overhang,” the team adds.

• But, they view FanDuel as a “best-in-class platform with leading market-share and a viable path to 2023 profitability.”

• Even ignoring the SOTP math and “trapped” value of FanDuel, FLTR trades at just 11.4x 2023E EV/EBITDA vs. its historical/pre-FanDuel multiple of 14x.

Chart of the day

Daniel Stone @DanielStoneGC

Flutter's UK & Ireland online business yielded 15.7% lower NGR in the year to March 2022 versus the overlapping 12 months to September 2021. The U.S. business (chiefly FanDuel) is set to become the group's single largest segment this year.

May 4th 2022

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Earnings in brief

Accel Entertainment Q1

• Revenue up 34% to $196.9m, adjusted EBITDA up 37% to $35.2m.

• Number of locations increase 4% to 2,565, number of VGTs up 7% to 13,663. 

Forced removal: Accel removed equipment from 30 locations with 150 VGTs in January following the Illinois Gaming Board enforcing a rule that requires operators to remove equipment from a location if there is no activity for 72 hours.

• CEO Andy Rubenstein said current group focus on closing the acquisition of Century Casinos. Nevada Gaming Control Board members have expressed concerns over due diligence, document retention and fines in other jurisdictions.

Regulatory roundup 

Ohio regulators will open online sportsbook applications June 15, potentially opening the door for the first operators to launch during or even before the 2022-23 football season. Missouri lawmakers are working on a potential compromise that could save sportsbook legalization hopes this session after a betting bill stalled in the Senate. There will be at least two sports betting proposals on California’s November ballot following the FanDuel-BetMGM-DraftKings proposal obtaining the number of required signatures. Another proposal backed by the San Manuel Band of Mission Indians, Wilton Rancheria and Rincon Band of Luiseño Indians has until July 11 to gather the required number of signatures.

Further reading: Wagers.com’s Steve Ruddock dives into the California ballot detail.

Newslines

Quickfire deal: Microgaming has completed the sale of the Quickfire casino games provider to Games Global, the private-equity-backed company led by Walter Bugno and Tim Mickley.

Drop zone: Affiliate provider Playmaker has acquired theSportsDrop.com, a US-focused site for major leagues and College sports which generates 30m monthly page impressions and 3m monthly users. The Sports Drop founder Mike Bellom has joined Playmaker’s senior leadership team as head of paid media. Financial details were not disclosed.

Boys from Brazil: Genius Sports will supply its sports betting data, odds and streaming feeds to Brazilian sportsbook Betsul. Brazil published its sports betting licensing rules this week. These include a €4.2m/$4.4m license fee, operators currently active in the market have six months in which to apply.

What we’re writing

Big deal: Scott Longley writes for Wagers.com on MGM’s LeoVegas offer.

What we’re reading

Most coveted: A 2016 interview with Carlo Ancellotti, the man with an eyebrow arch for the ages.

On social

Speaking of which, City crash or Real steel?  

SPORTbible @sportbible

Clarence Seedorf: “Manchester City, like PSG, lack a mentality. Real Madrid's mentality isn't something created in a year or two, or even ten. It's about coming to a club where you know you're a part of something much greater than yourself."

May 5th 2022

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Calendar

• May 5: Bally Corp, Penn National Gaming, AGS Q1

• May 6: DraftKings Q1

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com